AMAC Exclusive – By Katie Sullivan
As woke investing and so-called “ESG” policies have taken the corporate world by storm in recent years, and with little pushback from the few conservatives left in the executive class, Republican state treasurers and attorneys general have stepped up to defend the interests of shareholders – and have been rewarded by voters in turn.
In brief, “ESG” refers to corporate decisions supposedly made in the interests of serving “environmental, social, and governance” goals – which are invariably left-wing in nature. Investment banks divesting from fossil fuels companies, even when they remain highly profitable, are an example of the “environmental” part of the equation. Credit card companies refusing to process transactions from gun manufacturers is one popular “social” policy. “Governance” includes “equity” initiatives, like setting arbitrary quotas for the number of LGBTQ people, women, and minorities on corporate boards, regardless of whether they are actually the most qualified candidates for the job.
The force behind the massive ESG wave rocking corporate America is a wholesale redefinition of a time-tested principle. Traditionally, companies act in order to maximize returns for “shareholders” – or those with an actual financial investment in the company. According to ESG philosophy, however, companies should now act to benefit “stakeholders,” defined as anyone who may directly or indirectly be affected by the actions of a company.
This definition is intentionally broad to encompass as many people as possible. In effect, “stakeholder capitalism” allows woke executives to disregard the interests of actual shareholders in pursuit of their own ideological agenda by claiming that policies like blacklisting conservatives and providing company funds for employees to travel to receive abortions are in the interests of “stakeholders,” even if they are diametrically opposed to the interests of shareholders.
CEOs and corporate boards – often under pressure from left-wing activists – are then free to pick and choose which stakeholders’ interests they wish to prioritize. In light of this fundamental change to how companies operate, it is perhaps no surprise that a group of nearly 200 CEOs of the world’s most powerful companies felt a need to issue a statement on the “purpose of a corporation” outlining this new woke era of business.
This model is clearly bad news for investors, not to mention family values, stable economic growth, and conservatism as a whole. But after years of this woke virus infecting corporate America, some Republicans are starting to go on offense.
State treasurers in particular have been leaders in opposing ESG investing and restore political neutrality to investment and business decisions. In January, West Virginia Treasurer Riley became the first to divest his state’s pension plan from BlackRock over the company’s anti-coal stance.
Since then, South Carolina, Louisiana, Texas, West Virginia, Kentucky, Oklahoma, Florida, South Carolina, Arizona, Idaho, Utah, Wyoming, Arkansas, North Dakota, and Missouri have also taken similar bold measures to push back against the ESG principles guiding BlackRock. States have publicly divested a total of over $4 billion from BlackRock, citing their ESG policies. That figure does not even include the more than $20 billion that BlackRock stands to lose in Texas if it loses an appeal in a lawsuit claiming that the firm violated a Texas law prohibiting banks and asset managers from boycotting essential energy providers like oil and gas companies.
Some states like North Carolina have also used their investments to place additional pressure on woke investors. Earlier this month, North Carolina State Treasurer Dale Folwell publicly called on BlackRock CEO Larry Fink – one of the chief proponents of ESG – to resign, citing a “loss of confidence.”
“Unfortunately, Mr. Fink’s political agenda has gotten in the way of his same fiduciary duty,” Folwell said. “A focus on ESG is not a focus on returns, and potentially could force us to violate our own fiduciary duty of loyalty.”
The results of such policies speak for themselves. Republican state financial officers (treasurers and auditors) successfully defended every seat and even flipped five additional seats in November – an impressive record of success hardly seen anywhere else this cycle.
State attorneys general have also played a vital role in leading the anti-ESG movement. In a November 29 letter, 13 GOP attorneys general accused investment giant Vanguard of “breaching its promises” to investors, further calling on a federal agency to prevent the firm from investing in public utility companies given its public ESG stance. A few days later, on December 7, Vanguard became the first major firm to pull out of the Net Zero Asset Managers initiative. This dealt a major blow to the alliance, which has since backed down from some of its more controversial policies in order to avoid legal ramifications for its members.
Missouri Attorney General Eric Schmitt – who recently won election to the U.S. Senate – has also led a 19-state coalition into investment banks over ESG policies. Just this month, Nebraska Attorney General Doug Peterson released a scathing report on ESG, claiming that it violates fiduciary duty to impose ESG standards upon investments instead of focusing on maximizing financial returns.
Organizations like the State Financial Officers Foundation (SFOF) and the American Legislative Exchange Council (ALEC) – both of which were founded in part through efforts by Republican state officials – are also working to push back on ESG and raise awareness about the perils of far-left ideology in financial policy. A survey from October of this year found that 85% of Americans still do not know what ESG stands for, not to mention what all it entails for their hard-earned retirement savings. Activists have exploited this information gap for years to advance their ideological agenda without much public backlash. This year, SFOF launched a new website and campaign called “Our Money Our Values” to explain what ESG is in plain terms so everyday Americans can understand the impact ESG has on them and how they can stand up against it, especially to protect their own savings.
Republicans raising the alarm about woke corporatism have already been more than vindicated. According to Bloomberg, this year the largest ESG funds are down more than 15% on average, lagging the S&P. This includes BlackRock’s ESG fund. By contrast, funds that have not divested from oil and gas among other investments, such as the MAGA fund run by Point Bridge Capital out of Fort Worth, Texas, are doing 15% better than these ESG funds.
State Republican officials, often with little media fanfare, have led the way in protecting the interests of consumers and ordinary investors from the dangerous path of ESG. Republican elected officials elsewhere and those with sway in the industry could learn a great deal from their courage.
Katharine “Katie” Sullivan was as an Acting Assistant Attorney General and a senior advisor to the White House Domestic Policy Council under President Trump. She previously served 11 years as a state trial court judge in Colorado.
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ESG should also be reviewed by the Federal Election Commission as backdoor coordination with left leaning politicians!
Everyone should divest from Blackrock. Get away from the Fink, sorry Laurence Fink, CEO of BlackRock. Let him put his own money into the green old deal. Being too rich and powerful went to his big head. Scary……..
To Katherine Katie Sullivan, Great article, very important and encouraging. The part about what the organizations State Financial Officers Foundation and the American Legislative Exchange Council are doing in connection with raising awareness of the Environmental, Social, Governance situation is especially important and encouraging. I believe it is very good that your article ended with the mention of courage , as the quality of courage will help in providing a solution to this matter . Getting things right, protecting the interests of investors from the dangers of ESG strategies is admirable, and honorable .
Excellent article.
Since we no longer have any confidence in the integrity of elections, voting with your wallet is a very viable alternative!
Great article to bring to light about what ESG really is. Well worth the read.
And the people can help by not buying their stock and boycott them every way possible.
So many more businesses need to be boycotted. Only people go with what is easy. To keep your freedom is not easy. You have to fight for it every day.
Larry Fink is just another one of Klaus Schwab’s globalist Nazis.
Name calling is getting us no place!!!
Have money? USE IT for the GOOD
If you don’t know if your investments are being mismanaged by a woke investment firm, look at the “Net Zero Asset Managers” website, specifically the Signatories link. This will show every asset management firm that has signed on to this crap. Here is the direct link: Signatories – The Net Zero Asset Managers initiative If your investment firm is listed, I suggest you reinvest elsewhere.
ESG is counterintuitive at best. It is anti corporation – anti subsidiary – anti investor – anti consumer re: higher prices due to lower profits. When you compromise on the “best person for the job principal, you lose out on the best minds in the best places. Watering down the economy doesn’t make any sense.
The biden liberal agenda makes no sense. All their programs are counter productive and they have to know it. The goal is not going to make your life better and they just don’t care. They smile, lie into the camera, and half the country hears what they want to hear.
“The goal is not going to make your life better and they just don’t care”.
Correct, their goal is to enrich themselves and increase their power. If our founders had been anything like these “people” they would not have given us a democratic republic; we would have been an early precursor to the soviet union or cuba. In other words they would have given the country to themselves!
Yes! The corporarions hire the incompetent to wok for them. When the incompetent cannot do the work, the corporations push off their work on to someone else, still allowing the incompetant to get kudos for doing such a great job, while overworking the competant!
Been there and saw it happen!
Then they add more incompetant and refuse to train them!
Did anyone hear about “unintended acceleration” in automobiles. This was a software issue. But the car companies lied about it. They did not want the liability!
A clever lawyer could use anti-discriminatory laws to shoot it down
This is new normal Shocking would be common sense and logic
We can only fight and hope that this far left woke”FAD”will end soon and AMERICA can get back to being AMERICA.
Not what goes on in the CLASSROOMS now
Teachers need to be held to account,
There children need to go to those schools.
Counting the hours until my retirement money is no longer in the hands of Blackrock, thank you South Carolina.
Wake up people, We need fossil fuels until alternative energy is more affordable for the masses. We are throwing billions out the window trying to shove a square energy mandate into a round economic hole.
Everyone needs to contact their AGs and state treasurers and ask them if they’re divesting from Blackrock, etc. I just contacted mine to let him know how important an issue this is to the country’s survival.
The fiduciary responsibility of any professional money manager, whether it be for state pension funds or individual and corporate clients, is to maximize the return on investment for the investors of the fund or individual investment assets. Period. That means maximizing the total net income generated for the participants you are managing money for. ESG subordinates this fiduciary responsibility in favor of so-called “stakeholder value”, meaning a series of artifically designed social and economic constructs that do nothing to enhance the investor’s ROI (Return on Investment), but instead is centered around neo-Marxist “social and economic justice” values. The net result is ESG investing yields lower rates of return and higher management fees for the investors participating in ESG type investments.
The State Treasurers pulling their pension funds from firms using ESG investing is completely appropriate. These State Treasurers are fulfilling their fiduciary obligations to their state pension holders, as well as all the taxpayers of their states. If a state pension fund under-performs over the long-term, the state taxpayer is ultimately going to be faced with higher taxes to make up any shortfall.
The State AG’s suing the likes of Vanguard, Black Rock and State Street are also acting in the best interests of their state taxpayers and the nation as a whole. These 3 financial investment firms are violating their fiduciary responsibility to their investors in their funds in favor of promoting a political ideology that undermines a number of spund core financial principles in favor of imposing a set of desired political outcomes. That is NOT the role of a money management firm tasked with a fiduciary duty to its investors.
It will be interesting to see how the courts rule on these lawsuits. From a legal perspective, these are very clean cut cases. However, with the amount of infiltration of left-leaning Judges in our judicial system, who seem to enjoy either making new law from the bench or using incredibly flawed readings of existing laws, one can’t make assumptions about clear cut legal matters anymore.
For the individual investor, the path is a bit easier. Simply do your own research and avoid investing in any ESG type fund, ETF or individual asset. Your net returns will thank you for your due diligence.
PaulE, you are so knowledgeable about this stuff. Did the Pentagon invest the servicemembers money in China like they were going to back in 2016?
If your question is did the Pentagon invest in Chinese companies, as part of a diversified move to increase service members’ returns, that has been both yes and no over the last 6 years. The Pentagon had invested billions in Chinese companies, but then some Senators and the media began running stories about the national security concerns since the CCP has direct or indirect control of virtually all major Chinese companies. Especially after President Trump kept highlighting the fact that the CCP has its fingers into all businesses of any meaningful size that operate in China. So the Pentagon then pulled the funds rather than face congressional inquiries into who was making those type of ridiculous decisions in the Pentagon. You know, standard CYA.
Now however, it is difficult to say whether the Pentagon has gone back to investing pension funds in China since President Biden became POTUS. Things are generally much less transparent under this administration compared to the last. It wouldn’t surprise me to find that “a return to business as usual” in Washington also translated into the Pentagon going back to investing in Chinese companies once again. It general, it seems national security concerns mean vastly different things depending on who is sitting in the Oval Office.
PaulE– Well done. These efforts are currently but a pee hole in the snow. Over time the erosion of assets at Black Rock may have an impact. Black Rock has over $10,000,000,000,000 under management and over $68,000,000,000 in net worth.THIS IS GREAT AS THERE IS AN AWAKENING AS SEEN THROUGH THE “FIDUCIARY’S” POOR CHOICES. Too many other rabbit holes. Nice Job.
Yes, but none the less Larry Fink doesn’t seem to like the spotlight being shined on his very political behavior with client funds. He may be worried about losing some of the soverign wealth funds that are invested with Black Rock. That would really nik his bottom line, as they represent a couple of trillion dollars total and make the Board of Directors start to think about replacing him. He would still make out just fine financially, as he’s been extremely well compensated by Black Rock over the years, but it would be a big hit to his ego. He seems to love the fawning attention from the left that he gets. That may be why he has been trying a sort of half denial, half semi-apology style tour for the last month.
Vanguard seems far more concerned to date, as they are far more reliant on state and corporate pension plans, as well as individual investors. The most effective weapon against all these firms is still money and the threat of costing them billions in lost management fees.
Excellent news! Unless one lives in Michigan and it’s Leftist politicians, like myself.
luckily we are retired so our 401K and IRA are invested and there is NO Black Rock in our portfolio, but rest assured if your not retired and can choose where your’s goes the idiots that run Michigan now want to do away with “right to work”, meaning if your group is in a Union, you must join, those Democrats want that Union $$$.
Unfortunately, So true!
I have a hard time believing the Michigan election was on the up and up. No logic to the results after the horrible way Covid was handled and inflation as it is.
It wasn’t in the up amd up! When it came time to certify the election there were many who refused but, after Witchmer threatened them along with the witch AG they all backed down…their famies lives were threatened! Michigan did NOT elect Biden! In fact, you will never convince me that 80,000,000 people voted for biden…there are simply not that many ignorant Americans! Not even that many voted for Barry or Killery! The 2020 election was rigged and the American people are very well aware of that! You can censure all you want but we know the truth! The demonacrats sold their souls to the devil many years ago and they are so very afraid of Christians that they now label them domestic terrorists! That is the very definition of communism! Wake up people!
I know this is off the subject of investing. But, it is sad how the states are pushing for these “right to work” laws when they are really not. I would think “right to work” would mean you could not be forced to be in the union.
After my dad retired working for the county road division, they decided to go union. He was always against going union. But after he retired, they forced him to pay union dues , even though he had never joined the union. THEY ARE CRIMINALS! They had never negotiated for him or did any work that would make his retirement easier. Later, after he had passed away, a lawsuit was won in the U.S. Supreme Court saying that union membership was not required.
But all of that money they illegally took from him was never returned! One of the unions was AFSCME.
According to article on “Illinois Policy” website, more than 38,000 have left the Illinois unions since the Supreme Court decision. I guess the Supreme Court gets it! ()
The unions’ own federal reports show 9% of workers have chosen to break away from unions since the U.S. Supreme Court’s decision in Janus v. AFSCME.
OK Red States Unite here Awesome